Bank of Finland sees growth slowdown, inflation surge

HELSINKI (Reuters) - Finnish economic growth will come close to a halt next year while inflation is set to stay high as Russia's war on Ukraine takes a toll, the Bank of Finland said on Tuesday.

The central bank now sees growth at 1.7% this year, still within the 0.5% to 2% range it predicted in March, but the expansion will slow to 0.5% in 2023, it said in a statement.

Inflation in the Nordic nation is now seen at 5.6% in 2022, above the 4% to 5% range provided earlier before slowing to 2.4% in 2023, still above the European Central Bank's 2% target for the 19-nation currency bloc.

"Supply chain bottlenecks and high raw material prices are pushing up inflation," Bank of Finland Head of Forecasting Meri Obstbaum said. "Inflation is projected to slow next year as the impact of energy prices subsides and supply chain disruptions are expected to ease."

Risks to the growth forecast are on the downside, however, and the actual outcome could be worse, the bank added.

"Growth in the Finnish economy may fall short of the forecast, especially if disruptions in the availability of commodities and goods persist and price pressures fail to subside," the bank said. "In the worst case scenario, the entire euro area may fall into recession."

(Reporting by Anne Kauranen; Writing by Balazs Koranyi; Editing by Catherine Evans)